The Hindu Business Line : Long-distance learning, short-changed tax benefit

I AM a graduate and work as a project leader in a company. I am planning to do MBA through long-distance learning. Are there any tax benefits that I can get in respect of the fee paid for pursuing the post-graduation course?

Muthaiah

Reply

No deduction can be claimed in respect of the fee paid by you for pursuing the post-graduation course in MBA through long distance learning. Though a deduction is available under Section 80E for pursuing higher education, it is for repayment of a loan along with interest for the purpose of higher education for full-time studies for any graduate or post-graduate course in engineering, medicine, management or for a post-graduate course in applied science or pure science, including mathematics and statistics.

Deduction under Section 80E is available only if the following conditions are satisfied:

The assessee is an individual.

The assessee has out of his income chargeable to tax repaid a loan or the interest thereon, taken from any financial institution or approved charitable institution.

The loan has been taken for pursuing the assessee's higher education.

The deduction shall be the amount repaid by way of principal and interest but shall not exceed Rs 40,000 per annum. The deduction is available for eight assessment years commencing from the assessment year relevant to the previous year in which the assessee starts repaying the loan or the interest thereon.

Since you will be doing the course through long distance education it cannot be said that you are undergoing full-time education and, therefore, the benefit of the deduction will not be available to you.

If your employer gives you an allowance for doing the course then, to the extent of the fees paid, you will be exempt under Section 10(14) read with Rule 2BB which provides for an exemption in respect of any allowance granted for encouraging academic, research and training pursuits in education and research institutions, to the extent it is actually spent.

Query

I work in NPTC, Secunderabad. I live in my own house. This house is let on lease to my employer who, in turn, has allotted the house to me for my stay. My employer pays Rs 9,000 as rent to me. What is the tax liability in respect of such a transaction?

S. Oddenna

Reply

The rent received by you will be assessable to tax in your hands under the head `income from house property'. Against such income you would be able to claim a deduction in respect of the taxes levied by the local authority. You will also be able to claim as a deduction 30 per cent of such net annual value arrived at after reducing the taxes so levied.

If there is a loan taken to acquire the property you will be able to claim the entire interest on the housing loan without any ceiling limit. The principal repayment of the housing loan will also qualify for rebate if your gross total income does not exceed Rs 5 lakh.

The maximum amount that will qualify for rebate will be Rs 20,000. Further, since your employer has allotted a house to you for use, there will be a perquisite value, which will be added to your salary income. Such perquisite value would be 10 per cent of the salary or the amount of lease rental paid or payable by your employer, whichever is lesser.

Query

I have taken a housing loan from ICICI of Rs 11 lakh for the purchase of a flat in Trichy. I work in Bangalore and stay in a rented house. The flat at Trichy is occupied by my parents. Will it be possible for me to claim that the property at Trichy is self-occupied and also claim deduction in respect of interest and rebate in respect of the principal repayment?

Can I also claim exemption from HRA in respect of the rent paid? Will I have to submit any specific forms along with my income-tax returns? Please note that my parents are wholly dependent on me.

Hariram

Reply

If a property cannot actually be occupied by the owner because of his employment or profession being carried on at any other place and he has to reside in that other place, the annual value of the property may be taken as nil.

However, only one property owned by an assessee can be taken as self-occupied. Interest can be claimed as a deduction in respect of this property subject to the ceiling limits applicable to a self-occupied house property. In respect of the rent paid by you, exemption can be claimed under Section 10(13A) against the HRA. This exemption is available to the extent of the least of the following:

Excess of rent paid over 10 per cent of salary.

Fifty per cent of salary if the accommodation is in any of the four metropolitan cities, else 40 per cent of salary .

Actual HRA received.

If the parents live in a property owned by the assessee with the individual not living in that property but in a rented one, it is felt that the property should be treated as self-occupied provided no benefit is derived by the individual from his parents in respect of the property and where the parents are dependent on the son.

You may not have to file any forms along with your income-tax return. You will have to give the rent receipts to your employer so that the exemption under Section 10(13A) can be allowed in computing the tax to be deducted at source on your salary.

Similarly, you will also have to give particulars of the income from house property treating the annual value as nil and the particulars of your interest paid on housing loan, if any, in the prescribed Form 12C, so that the same can be taken into account by your employer in deducting the tax at source on salary.

Query

I took a housing loan in September 2004 to purchase a flat in Bangalore. The construction and registration of the flat have been completed and the flat is ready for occupation. I have also taken possession of the flat in September 2004. I have, however, moved into the flat only in January 2005.

Can I claim the interest on the housing loan taken by me for the full year as a deduction? Will the principal amount qualify for rebate? Will it also be possible for me to claim exemption in respect of HRA in respect of the rent paid by me until January 2005?

Ashok

Reply

You can claim the interest for the full year 2004-05 as a deduction in computing your income from house property. You can also claim rebate under Section 88 in respect of the principal repayment subject to your gross total income not exceeding Rs 5,00,000.

It will also be possible for you to claim the exemption under Section 10(13A) in respect of HRA on the basis of the rent paid by you until January 2005.

Mail your queries to taxtalk@thehindu.co.in or by post to Tax Talk', Business Line, Kasturi Buildings, 859, Anna Salai, Chennai-600002.

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